Electricity Industry

The final product of the electricity industry is among the fastest growing forms of end-use energy. Due to spiraling energy demand, the electricity industry is expected to grow significantly till 2030.

Market Value: The global market value of the electricity industry includes the total value of electricity sold to industrial, commercial, residential and other end-users. The market value grew by 14.5% in 2007. Demand from the industrial sector made the highest contribution of 38.1%. In terms of regional consumption, the Asia-Pacific countries claimed the highest share of 36.3%. This sudden surge in demand can be attributed to phenomenal economic growth, resulting in higher electricity demand and electricity rates for residential and commercial purposes.

Consumption pattern: In 2007, the total volume of electricity consumed jumped 5.6%. This is expected to grow by 36.7% in 2012.

Generation: Since 1990, the growth rate of electricity generation has been higher than that of total energy consumption. Global electricity generation is expected to grow at an average annual rate of 2.6% till 2030. Electricité de France (EDF) has been one of the leading contributors to total electricity generation. In 2007, it made a significant contribution of 4.2% in worldwide electricity generation.

Electricity Industry: Structure

The three tiered structure of the global electricity industry includes:

Generators: Players at this level are responsible for the generation of electricity. Following this, electricity is transmitted through a dense network of transmission lines. This network can be either centralized (depending on one major supplying unit) or decentralized (consisting of a network of units responsible for speedy transmission).

Distributors: Distributors are the ones who own and operate a dense tower network responsible for transmitting electricity for residential and commercial purposes.

Suppliers: This segment comprises of organizations responsible for selling electricity to the end-users. Customers mainly get in touch with these suppliers for their domestic and commercial energy needs.

Electricity Industry: Regulations

Several national governments have developed regulatory frameworks for tariff approval. They have also devised sector-wise policies focused on the transmission and distribution of electricity. Some of the popular regulatory guidelines are the US-based cost of service regulation, UK’s incentive-based regulatory mechanism and Norway’s revenue capping and franchising regulation. All these regulations are aimed at preventing the monopolization of the electricity industry.

Newsletter Signup

Contributors

Professor at Columbia University. Recipient of the Nobel Memorial Prize in Economic Sciences in 2001 & the John Bates Clark Medal in 1979. Author of "Freefall: America, Free Markets", "The Sinking of the World Economy", "Globalisation and its Discontents" & "Making Globalisation Work".

Dr Steinbock is an internationally recognized expert of the multipolar world. He focuses on international business, international relations, investment and risk among all major advanced economies and large emerging economies. In addition to advisory activities (www.differencegroup.net), he is affiliated with India China and America Institute (USA), Shanghai Institutes for International Studies (China) and EU Center (Singapore). For more, please see http://www.differencegroup.net/. Research Director of International Business at India China and America Institute (USA) and Visiting Fellow at Shanghai Institutes for International Studies (China) and the EU Center (Singapore).